Question

Teal Company’s ledger shows the following balances on December 31, 2017. 8% Preferred Stock—$10 par value, outstanding 20,100 shares $ 201,000 Common Stock—$100 par value, outstanding 30,100 shares 3,010,000 Retained Earnings 666,000 Assuming that the directors decide to declare total dividends in the amount of $350,000, determine how much each class of stock should receive under each of the conditions stated below. One year‘s dividends are in arrears on the preferred stock.

Answer 1

preferred stock 32,160

dividend per share: 1.6 dollars

common stock 317,840

dividend per share: 10.56 dollars

Step-by-step explanation:

PREFERRED STOCK dividends per year:

201,000 X 8% = 16,080

We will pay this years and the previous year

so total preferred stock dividends:

16,080 x 2 = 32,160

stock per share:

32,160 / 20,100 = 1.6

COMMON STOCK dividends

dividends declared - preferred stock

350,000 - 32,160 = 317,840

317,840/30,100 = 10,5594 = 10.56